Renshaw, Derwent.

English

Archive of European Integration

THE  EFFECT  OF  CHANGES  IN  THE  CAP  ON  US AGRICULTURAL  TRADE  OUTLOOK  ~84 Derwent  Renshaw Delegation of the Commission  of  European  Communities 1984  Agricultural  Outlook Conference,  Session  #  27 Washington,  D.C. I  propose  spending  the  time alloted to  me morning  on  the subject of the Commission's  recent proposals for  the adjustment of the European  Communities  Comnon  Agri-cultural Policy,  since  I  get the very strong impression that a  number  of people,  not  a  hundred miles  from  this hall,  hold the view that these proposals  could adversely affect "the future of  US  agricultural trade"  - the  topic  for  this morning's  session. The  framework  of this package of measures  was  made known  at the  end of July since when it has  been  fleshed out by  a  number  of more  precise,  more  detailed proposals. Regrettably,  there  seems  to  me  to have  been  a  great deal of misunderstanding over these proposals  - one might even  say ,. misrepresentation  - to the extent that they are  being portrayed as  a  serious  threat to the  US  farmer  and  exporter. A  great deal of attention has  been paid,  quite under-standably,  to  the external measures  contained  in the  package but rarely,  if at all,  is any mention  made  of the  fact that these proposed external measures  form only  a  part,  and  a  small part at that,  of  a  much  larger progranune. 60th ANNUAL AGRICULTURAL OUTLOOK CONFERENCE • USDA OCT. 31-NOV. 3 1983 • WASHINGTON, D.C. 60 YEARS OF SERVICE TO AMERICAN  AGRICULTURE - 2  -What  is more,  the alleged effect of these external measures  has  been grossly exaggerated.  As  recently as  last Thursday,  a  Senate hearing was  told - in all seriousness  -that the Commission's  proposals  regarding grain substitutes and  vegetable oil would,  if adopted,  cost the United States 5  billion dollars  in lost sales.  I'm sure that no  one  in this knowledgeable  audience  would  be  taken  in by  such  an extraordinary claim.  But this is not the first occasion on which  this  figure  has  been  mentioned  so  I  will return and examine it in a  moment. It is, of course,  not difficult to appreciate the great sensitivity here in the  US  as  regards  agricultural exports when  one  takes  into account that 2  acres out of every  5  us  farm acres  rely on overseas  sales  - a  significantly higher proportion than  that for  the  industrial sector and  that,  for  example,  about two  thirds of  US  wheat  production  is  surplus to internal requirements  and is consequently dependent on  an  unreliable world market  for outlets.  So,  some  concentration on  the external effects of our proposals is perhaps  not  too  surprising.  But  I  should like to  use  this opportunity for which  I  am  most  grateful  to the organi-sers of this conference,  to briefly describe  the whole  package  and to set the  two  relatively small  elements  concerning  corn  gluten feed  and  vegetable oil in their true perspective. First, what  are  we  trying to  achieve?  The  main  thrust of the  Commission's  proposals is - 3  -- to limit Community  spending on  farm  support - to  adapt our agricultural policy to meet  the changed conditions of the mid  80's - to discourage  surplus  farm production. The  Common  Agricultural  Policy  - more  familiarly  known to both its admirers  and  detractors  as  the  CAP  - is one of the major  achievements of the  Community.  But,  like anything else in this ever changing world,  it cannot,  if it is to survive,  remain immutable  and  become  fossilised.  Since its inception  some  two decades  ago,  in addition to the  technical  progress  and  productivity increases  acknowledged  by  Secretary Block  on  Monday,  fundamental structural changes  have  also  taken place.  There  are  now approximately  8  million working  on  the  land  compared with  18 million  20  years  ago.  The  number  of holdings  has  fallen  and  their average  size increased to  about  45  acres  - small  by American standards,  but double what it was  in Europe  when  the  CAP  started. In spite of these  technical  advances  and of  the  support afforded  by  the  CAP,  and  contrary to what  is often believed, incomes  from  agriculture have  increased more  slowly  than other incomes  since 1973.  High  rates of inflation and  divergences  of inflation rates between our  10  Member  States have  also created problems  for  the  CAP. But  in spite of these difficult economic  conditions, the  Community  remains  not only the worlds  largest importer of food  - taking about one  quarter of total world agricultural imports  - but also  the  US  farmers  best customer  - to  the extent that we  currently run  a  massive deficit on our transatlantic  agricultural - 4  -trade of between  6  and  7  billion dollars  - four  times  the deficit we  ran  in 1971. One  of the principles of our agricultural policy  - just as it is in most  other parts of the world  - is to  provide  a reasonable  standard of living for our  farmers  - the  descendants of men  and  women  who  have  farmed  our  European  soil  for  2000 ,years. The  CAP  has,in addition to its economic  role,  an  important social function  as well.  It has  also got to  be  set against  a  historic, cultural and  environmental  framework.  However,  in providing our farmers  with  a  reasonable  standard of living,  the  Community cannot merely  sign  a  blank  cheque  with  no  ceiling on  expenditure. If Community  agriculture is to  succeed,  the  accent must  be  increasing-ly placed on  production at competitive prices. It is no  secret that the  background  to our proposals  is  -first,  a  shortage of  funds.  From  1974  to  1979  expenditure on supporting agricultural markets  grew at  23  % a  year  - almost  double the rate of growth of revenue.  Agricultural expenditure  remained fairly stable in the period 1980  to  1982  largely because  prices remained  relatively high  on world markets.  But  since  then,  expendi-ture has  increased sharply  - an  estimated  30  % or thereabouts  is expected  for  1983.  So,  the  funds  are getting very  low  - and  the Community,  unlike national  governments,  cannot  run  a  budget deficit. - second,  advances  in technical progress  and  great  im-provements  in productivity have  meant  that output has  risen more rapidly than  consumption.  Increases  in the  volume  of agricultural production have  averaged  between 1.5  % and  2.0  % a  year whilst consurnptionhas  only risen by  about  0,5  %. - 5  -This  is the  sombre  background  to the  tough  programme of measures  proposed by  the  Commission  - and which  are  now before  the Council of Ministers  - for the rationalisation of European  agriculture. Consequently,  the Commission  proposes,  in particular, to  tighten and  to extend  the application of the guarantee threshold  system  to more  products.  Guarantee  thresholds dis-courage  surplus production  by  putting  a  strict predetermined ceiling on  the  amount  of  a  given crop  EC  farmers  may  produce without being obliged to contribute  towards  the cost of disposing of  the  surplus.  The  Commission  takes  the  view that it is  no~ longer  reasonable or possible to provide open  ended  guarantees to  farmers  when  market outlets no  longer exist.  The  Community's sugar producers  have,  incidentally,  had  to  pay  the  full cost of disposing of excess  sugar production  for  the last 2  years.  But these measures  will generally be  strengthened  and  extended over a  wide  range. Milk,  vlhich  accounts  for  about  one  third of the  EC' s  current farm price spending,  provides  a  very clear example  of  how  these  new measures  are designed  to discourage over-production.  The  Commission has  proposed that as  from  1984  milk producers  be  required to pay a  supplementary  levy on  the  amount of milk  they  produce  which exceeds  101  % of their total 1981  production.  This  supplementary levy would  be  equal  to  75  % of our milk  target price.  In addition, the  Commission  has  proposed  a  further  4  % levy on all milk  produced on  intensive dairy  farms,  together with  the  suspension of  support buying  of skimmed milk  powder  from October  to March. - 6  -Guarantee  thresholds  already apply  to most  grains,  to processed  tomatoes,  oilseeds  and  sugar  and  has  already been proposed  for dried raisins.  In the  case of grains  and oilseeds, the  system would  be  extended  to  cover all the  main  types  of grain and  major oilseeds.  This will mean  for  these products  that if production exceeds  the  fixed  ceiling,  then  support prices will be abated  for  the next marketing year. In addition to the  tightening  and  extension of the threshold concept,  the  Commission's  proposed  programme  also in-cludes  a  restrictive price policy  for all agricultural products which will take into  account not only the  economic  situation of the agricultural industry itself but also the markets  on which it depends.  In the case of those products  where  our prices are higher  than  those of our principal competitors  - and  here let me add  that in many  cases  they are at about  the  same  level  (milk  for example)  and  in  some  lower  - the  Commission  proposed  that the efforts to narrow this  gap  should be  accelerated.  The  implementation of such  a  restrictive price policy could well  mean  reductions  in support prices expressed in national currencies. A  reduction in  a  number  of production aids  and  premiums has  also been  recommended  - on  the  processing of fruit withdrawn from  the market  for  example  and  also in the olive oil and  wine sectors. These  are  some  of the internal measures  envisaged. The  full  range - 7  -- production quotas  with  severe penalties  for exceeding  them - extension of threshold  guarantees - much  lower price increases  for  farm  products (in  some  cases  reductions  in national currencies) - prices  for  some  surplus  commodities  to  be  fixed for more  than one  marketing year - reduced  intervention or support buying - and  the discontinuation of  a  number  of aids and  premiums are all initiatives which will hit the  European  farmer  and which will require substantial sacrifices  from  him.  They  have not been well  received at home,  and  COPA- the  European  farmer's organisation  - has  gone  as  far  as  to  say that they  "would  have extremely serious direct and  indirect repercussio;:I,'.;  cr!  all sectors of agricultural production and  would  lead to  a  further substantial fall  in farmers'  incomes,  which  have  already declined by  about 20  % in real  terms  since  the  mid  1970's." When  we  are  asking our  own  farmers  to  make  real sacri-fices  and  to  limit their production  - or  as  a  friend of mine recently put it "when  we  are  taking the  knife  to our  farmers"  -the  Commission  believes  that it is not in the  least unreasonable for  the Community  to  review its treatment of conpeting  imports provided that this is done  strictly in accordance \vith  the inter-national  trading rules  as  set out  in the  GATT. - 8  -This,  of course,  brings  me  to the  two  elements of  the package  that have  been  given star billing here.  But before doing so  I  would  like to turn briefly to  a  remark  made  on  Monday  about unfair trading practices  and  which  referred to export subsidies. Since  this clearly has  some  relevance  for  US  farm  exports.  For me,  unfair implies  something that is against the rules.  However, agricultural export subsidies  are  permitted under  GATT  international trading rules provided that they  do  not result in  a  member  gaining an  inequitable share of the market.  We  maintain that we  have  ob-served these rules  and  have  thus  not acted unfairly.  From this  I can only assume  that it is perhaps  the  rules  themselves  that are considered by  some  to be  unfair. But  back  to  grain substitutes  and  the  proposed oils and fats  tax. First,  grain substitutes  and  in particular corn  gluten feed  and  citrus pellets.  As  I  said earlier,  we  are aiming  to close the  gap  between  our grain prices  and  those of our competitors. This  would  have  the effect of making  substitutes less attractive. But  until that time  and whilst we  are  implementing  a  guarantee threshold  for  grains  and  requiring our cereal  growers  to limit their production, it is absolutely essential to have  some  effec-tive stabilisation of  the  imports  of grain substitutes.  Since, as  we  all know,  these products displace  Community  grown  cereals in animal  feed  and  have  the effect of  forcing  more  EC  grain onto the world market. - 9  -Our efforts to stabilise our  imports of substitutes is not  a  measure  aimed  specifically at the  residues  and  byproducts which  come  from  United States processing industries  - yet another misconception that has  gained currency.  Substitutes are  imported into the  EC  from  a  wide  range of sources,and  arrangements  have already been  made  for manioc  and  bran  coming  from  such areas ,as South East Asia  and  elsewhere. It is now  proposed  to stabilise the  imports  of other major  substitutes  - corn gluten  feed  and citrus pellets.  Imports of corn gluten  feed  - a  residue  to  a  large extent  from  the  sweetener industry which  has  been  able to take  advantage of the  umbrella provided by  US  support  arrangemen~ for  sugar  - have  soared  from 700,000  tons  to  3  million tons  since  1974.  Citrus pellets have shown  a  similar rate of increase. However,  what is being proposed  for  both corn  gluten  feed and  for citrus pellets is not  a  banning  of  imports,  or  even  a  re-duction  in  imports  but  a  stabilisation of imports  and this only after fully carrying out the procecures  provided  for  in the  GATT. There will thus  be  no  loss of trade. The  proposed tax on  fats  and oils is frequently presented here as  a  purely external measure  which will  impair  the duty  free access  to the  EC  of  soya beans,  soya meal  and  other oilseeds  and oilseed products,  valued at around  4  billion dollars  in 1982. This  is just not  so. - -~-~---------------- 10  -First,  the tax would  be  a  non-discriminatory internal consumption  tax on all oils and  fats  (excluding butter)  used in Europe  for  human  consumption whether  produced  locally or imported.  This non-discriminatory treatment is in full  accord with international trading rules. Second,  imports of  soya  bean  and  soya meal  - or any  ' other oil seed  - would  not  be  subjected to  any  import tax or levy. Third,  it is extremely doubtful whether  the  proposed tax would  have  any discernable effect on  the quantities of beans (or meal)  imported  since a)  the  low rate of tax proposed  combined with  the  reduction in butter subsidies is not likely to alter consumption patterns of  soya  bean oil and  margarine b)  all other vegetable oils,  including olive oil, whether obtained  from  imported or domestically  produced  seeds  would  be taxed at the  same  flat rate.  This  would  have  a  proportionally greater effect on  the  lower priced  oils  - such  as  rape  seed oil. Fourth,  the  tax would  not apply  to oils used  for  industrial purposes,  nor would it affect any oil which  was  later exported  from the  Corrununity. Lastly,  soya  beans  and  meal  are  imported very  largely  for animal  feed  and  not  for oil production. This  brings  me  back  to the  highly misleading figure of 5  billion dollars worth  of  lost markets  which  was  being  tossed around last week.  I  suppose  that this  figure  represents the complete  loss of all sales  to  the  EC  of corn  gluten  feed  and - 11 -citrus pulp,  currently worth  about  $  700  million and  total oil-seed exports valued at around  $  4  billion.  To  claim that these sales would  be lost is to play fast  and  loose with  the  facts of the situation - since what  is being proposed,  as  I  have  tried to explain,  is  a  stabilisation of substitute imports  - not even  a cutting back  and  most certainly not  a  total ban,  as  is implied '  when  a  loss of  5  billion is bandied  about plus  a  modest  internal consumption  tax on oils and  fats which  should have  no  discernible effect on  the EC's  massive  imports  of soya  bean  and  meal.  Neither is it very helpful in the  interests of trying to  understand each others problems  to present our measures  as  was  done  on  !·1onday  as representing  a  potential loss of  3  1/2 billion  $  over  5  years  on corn gluten  feed  and citrus pellets alone,  since  - I  repeat  - our aim is to stabilise not cut these  imports. In  concluding,  Mr.  Chairman,  I  submit  that this major package has  not  been  designed  to shift the  burden  of adjusting the  CAP  away  from  the  shoulders of our  mvn  farmers  onto  those of American  farmers  and exporters.  If you  are  in  any doubt,  I  suggest you  ask  any  member  of the European  farmers  delegation  now  in Washington  for meetings  with  the  Chamber of Commerce  who  they think is being asked  to bear  the burden. First,  soyabean  and  soya bean  meal  exports  would  not be  affected by  the  proposed  tax on oils  and  fats. Second,  stabilisation of corn gluten  feed  and  citrus pellet imports will be  carried out in strict conformity with GATT  rules  and  in full consultation with the  United States. Third,  by  far  the most  substantial and  toughest part of this package  is that which affects our  own  farmers  and  which calls for  major  sacrifices on  their part. - 12  -These  measures  which  represent  a  major shift in the direction urged  for years  by  United States critics of the Common  Agricultural Policy should be welcome  news  for  US farmers  and  exporters who  have  long complained about  the European  Communities  extravagant  spending  on  agriculture.  They should not  reduce  current levels of  US  exports  to  the  Commun~ty. On  the contrary,  the  US  farmer  should stand to benefit  from  the cutbacks  envisaged in European  farm  production which  competes with  US  products  on world markets.  This  always  assumes,  of course,  that world  import  demand  picks  up  again  and  is main-tained,  that some  way  out of the debt problems  of developing countries  can  be  found because  this is where  the  potential lies and  that the  US  is able  to deal with  the  factor that bears  the most  significant responsibility for  the  fall in its exports  -the  strength of the dollar. 

The effects of changes in the CAP on US agricultural trade. Speech by Derwent Renshaw, Delegation of the Commission of European Communities, at the 1984 Agricultural Outlook Conference. Washington DC, 31 October-3 November 1984

THE EFFECT OF CHANGES IN THE CAP ON US 
AGRICULTURAL TRADE OUTLOOK ~84 
Derwent Renshaw 
Delegation of the Commission of European Communities 
1984 Agricultural Outlook Conference, Session # 27 
Washington, D.C. 
I propose spending the time alloted to me 
morning on the subject of the Commission's recent proposals 
for the adjustment of the European Communities Comnon Agri-
cultural Policy, since I get the very strong impression that 
a number of people, not a hundred miles from this hall, hold 
the view that these proposals could adversely affect "the 
future of US agricultural trade" - the topic for this 
morning's session. 
The framework of this package of measures was made 
known at the end of July since when it has been fleshed out 
by a number of more precise, more detailed proposals. 
Regrettably, there seems to me to have been a great deal of 
misunderstanding over these proposals - one might even say 
,. 
misrepresentation - to the extent that they are being portrayed 
as a serious threat to the US farmer and exporter. 
A great deal of attention has been paid, quite under-
standably, to the external measures contained in the package 
but rarely, if at all, is any mention made of the fact that 
these proposed external measures form only a part, and a small 
part at that, of a much larger progranune. 
60th ANNUAL AGRICULTURAL OUTLOOK CONFERENCE • USDA 
OCT. 31-NOV. 3 1983 • WASHINGTON, D.C. 
60 YEARS OF SERVICE TO AMERICAN AGRICULTURE 
- 2 -
What is more, the alleged effect of these external 
measures has been grossly exaggerated. As recently as last 
Thursday, a Senate hearing was told - in all seriousness -
that the Commission's proposals regarding grain substitutes 
and vegetable oil would, if adopted, cost the United States 
5 billion dollars in lost sales. I'm sure that no one in 
this knowledgeable audience would be taken in by such an 
extraordinary claim. But this is not the first occasion on 
which this figure has been mentioned so I will return and 
examine it in a moment. 
It is, of course, not difficult to appreciate the 
great sensitivity here in the US as regards agricultural exports 
when one takes into account that 2 acres out of every 5 us farm 
acres rely on overseas sales - a significantly higher proportion 
than that for the industrial sector and that, for example, about 
two thirds of US wheat production is surplus to internal 
requirements and is consequently dependent on an unreliable world 
market for outlets. So, some concentration on the external effects 
of our proposals is perhaps not too surprising. But I should like 
to use this opportunity for which I am most grateful to the organi-
sers of this conference, to briefly describe the whole package and 
to set the two relatively small elements concerning corn gluten 
feed and vegetable oil in their true perspective. 
First, what are we trying to achieve? The main thrust 
of the Commission's proposals is 
- 3 -
- to limit Community spending on farm support 
- to adapt our agricultural policy to meet the 
changed conditions of the mid 80's 
- to discourage surplus farm production. 
The Common Agricultural Policy - more familiarly known 
to both its admirers and detractors as the CAP - is one of the 
major achievements of the Community. But, like anything else in 
this ever changing world, it cannot, if it is to survive, remain 
immutable and become fossilised. Since its inception some two 
decades ago, in addition to the technical progress and productivity 
increases acknowledged by Secretary Block on Monday, fundamental 
structural changes have also taken place. There are now 
approximately 8 million working on the land compared with 18 
million 20 years ago. The number of holdings has fallen and their 
average size increased to about 45 acres - small by American 
standards, but double what it was in Europe when the CAP started. 
In spite of these technical advances and of the support 
afforded by the CAP, and contrary to what is often believed, 
incomes from agriculture have increased more slowly than other 
incomes since 1973. High rates of inflation and divergences of 
inflation rates between our 10 Member States have also created 
problems for the CAP. 
But in spite of these difficult economic conditions, 
the Community remains not only the worlds largest importer of 
food - taking about one quarter of total world agricultural 
imports - but also the US farmers best customer - to the extent 
that we currently run a massive deficit on our transatlantic agricultural 
- 4 -
trade of between 6 and 7 billion dollars - four times the deficit 
we ran in 1971. 
One of the principles of our agricultural policy - just 
as it is in most other parts of the world - is to provide a 
reasonable standard of living for our farmers - the descendants 
of men and women who have farmed our European soil for 2000 ,years. 
The CAP has,in addition to its economic role, an important social 
function as well. It has also got to be set against a historic, 
cultural and environmental framework. However, in providing our 
farmers with a reasonable standard of living, the Community 
cannot merely sign a blank cheque with no ceiling on expenditure. 
If Community agriculture is to succeed, the accent must be increasing-
ly placed on production at competitive prices. 
It is no secret that the background to our proposals is -
first, a shortage of funds. From 1974 to 1979 expenditure on 
supporting agricultural markets grew at 23 % a year - almost double 
the rate of growth of revenue. Agricultural expenditure remained 
fairly stable in the period 1980 to 1982 largely because prices 
remained relatively high on world markets. But since then, expendi-
ture has increased sharply - an estimated 30 % or thereabouts is 
expected for 1983. So, the funds are getting very low - and the 
Community, unlike national governments, cannot run a budget deficit. 
- second, advances in technical progress and great im-
provements in productivity have meant that output has risen more 
rapidly than consumption. Increases in the volume of agricultural 
production have averaged between 1.5 % and 2.0 % a year whilst 
consurnptionhas only risen by about 0,5 %. 
- 5 -
This is the sombre background to the tough programme 
of measures proposed by the Commission - and which are now 
before the Council of Ministers - for the rationalisation of 
European agriculture. 
Consequently, the Commission proposes, in particular, 
to tighten and to extend the application of the guarantee 
threshold system to more products. Guarantee thresholds dis-
courage surplus production by putting a strict predetermined 
ceiling on the amount of a given crop EC farmers may produce 
without being obliged to contribute towards the cost of disposing 
of the surplus. The Commission takes the view that it is no~ 
longer reasonable or possible to provide open ended guarantees 
to farmers when market outlets no longer exist. The Community's 
sugar producers have, incidentally, had to pay the full cost of 
disposing of excess sugar production for the last 2 years. But 
these measures will generally be strengthened and extended over 
a wide range. 
Milk, vlhich accounts for about one third of the EC' s current 
farm price spending, provides a very clear example of how these new 
measures are designed to discourage over-production. The Commission 
has proposed that as from 1984 milk producers be required to pay 
a supplementary levy on the amount of milk they produce which 
exceeds 101 % of their total 1981 production. This supplementary 
levy would be equal to 75 % of our milk target price. In addition, 
the Commission has proposed a further 4 % levy on all milk produced 
on intensive dairy farms, together with the suspension of support 
buying of skimmed milk powder from October to March. 
- 6 -
Guarantee thresholds already apply to most grains, to 
processed tomatoes, oilseeds and sugar and has already been 
proposed for dried raisins. In the case of grains and oilseeds, 
the system would be extended to cover all the main types of grain 
and major oilseeds. This will mean for these products that if 
production exceeds the fixed ceiling, then support prices will 
be abated for the next marketing year. 
In addition to the tightening and extension of the 
threshold concept, the Commission's proposed programme also in-
cludes a restrictive price policy for all agricultural products 
which will take into account not only the economic situation 
of the agricultural industry itself but also the markets on which 
it depends. In the case of those products where our prices are 
higher than those of our principal competitors - and here let me 
add that in many cases they are at about the same level (milk for 
example) and in some lower - the Commission proposed that the efforts 
to narrow this gap should be accelerated. The implementation of 
such a restrictive price policy could well mean reductions in 
support prices expressed in national currencies. 
A reduction in a number of production aids and premiums 
has also been recommended - on the processing of fruit withdrawn 
from the market for example and also in the olive oil and wine 
sectors. 
These are some of the internal measures envisaged. 
The full range 
- 7 -
- production quotas with severe penalties for 
exceeding them 
- extension of threshold guarantees 
- much lower price increases for farm products 
(in some cases reductions in national currencies) 
- prices for some surplus commodities to be fixed 
for more than one marketing year 
- reduced intervention or support buying 
- and the discontinuation of a number of aids 
and premiums 
are all initiatives which will hit the European farmer and 
which will require substantial sacrifices from him. They have 
not been well received at home, and COPA- the European farmer's 
organisation - has gone as far as to say that they "would have 
extremely serious direct and indirect repercussio;:I,'.; cr! all sectors 
of agricultural production and would lead to a further substantial 
fall in farmers' incomes, which have already declined by about 
20 % in real terms since the mid 1970's." 
When we are asking our own farmers to make real sacri-
fices and to limit their production - or as a friend of mine 
recently put it "when we are taking the knife to our farmers" -
the Commission believes that it is not in the least unreasonable 
for the Community to review its treatment of conpeting imports 
provided that this is done strictly in accordance \vith the inter-
national trading rules as set out in the GATT. 
- 8 -
This, of course, brings me to the two elements of the 
package that have been given star billing here. But before doing 
so I would like to turn briefly to a remark made on Monday about 
unfair trading practices and which referred to export subsidies. 
Since this clearly has some relevance for US farm exports. For 
me, unfair implies something that is against the rules. However, 
agricultural export subsidies are permitted under GATT international 
trading rules provided that they do not result in a member gaining 
an inequitable share of the market. We maintain that we have ob-
served these rules and have thus not acted unfairly. From this I 
can only assume that it is perhaps the rules themselves that are 
considered by some to be unfair. 
But back to grain substitutes and the proposed oils and 
fats tax. 
First, grain substitutes and in particular corn gluten 
feed and citrus pellets. As I said earlier, we are aiming to 
close the gap between our grain prices and those of our competitors. 
This would have the effect of making substitutes less attractive. 
But until that time and whilst we are implementing a guarantee 
threshold for grains and requiring our cereal growers to limit 
their production, it is absolutely essential to have some effec-
tive stabilisation of the imports of grain substitutes. Since, 
as we all know, these products displace Community grown cereals 
in animal feed and have the effect of forcing more EC grain onto 
the world market. 
- 9 -
Our efforts to stabilise our imports of substitutes is 
not a measure aimed specifically at the residues and byproducts 
which come from United States processing industries - yet another 
misconception that has gained currency. Substitutes are imported 
into the EC from a wide range of sources,and arrangements have 
already been made for manioc and bran coming from such areas ,as 
South East Asia and elsewhere. 
It is now proposed to stabilise the imports of other 
major substitutes - corn gluten feed and citrus pellets. Imports 
of corn gluten feed - a residue to a large extent from the sweetener 
industry which has been able to take advantage of the umbrella 
provided by US support arrangemen~ for sugar - have soared from 
700,000 tons to 3 million tons since 1974. Citrus pellets have 
shown a similar rate of increase. 
However, what is being proposed for both corn gluten feed 
and for citrus pellets is not a banning of imports, or even a re-
duction in imports but a stabilisation of imports and this only 
after fully carrying out the procecures provided for in the GATT. 
There will thus be no loss of trade. 
The proposed tax on fats and oils is frequently presented 
here as a purely external measure which will impair the duty free 
access to the EC of soya beans, soya meal and other oilseeds and 
oilseed products, valued at around 4 billion dollars in 1982. 
This is just not so. 
--~-~---------------
- 10 -
First, the tax would be a non-discriminatory internal 
consumption tax on all oils and fats (excluding butter) used 
in Europe for human consumption whether produced locally or 
imported. This non-discriminatory treatment is in full accord 
with international trading rules. 
Second, imports of soya bean and soya meal - or any ' 
other oil seed - would not be subjected to any import tax or 
levy. 
Third, it is extremely doubtful whether the proposed 
tax would have any discernable effect on the quantities of beans 
(or meal) imported since 
a) the low rate of tax proposed combined with the reduction 
in butter subsidies is not likely to alter consumption patterns 
of soya bean oil and margarine 
b) all other vegetable oils, including olive oil, whether 
obtained from imported or domestically produced seeds would be 
taxed at the same flat rate. This would have a proportionally 
greater effect on the lower priced oils - such as rape seed oil. 
Fourth, the tax would not apply to oils used for industrial 
purposes, nor would it affect any oil which was later exported from 
the Corrununity. 
Lastly, soya beans and meal are imported very largely for 
animal feed and not for oil production. 
This brings me back to the highly misleading figure of 
5 billion dollars worth of lost markets which was being tossed 
around last week. I suppose that this figure represents the 
complete loss of all sales to the EC of corn gluten feed and 
- 11 -
citrus pulp, currently worth about $ 700 million and total oil-
seed exports valued at around $ 4 billion. To claim that these 
sales would be lost is to play fast and loose with the facts 
of the situation - since what is being proposed, as I have tried 
to explain, is a stabilisation of substitute imports - not even a 
cutting back and most certainly not a total ban, as is implied 
' when a loss of 5 billion is bandied about plus a modest internal 
consumption tax on oils and fats which should have no discernible 
effect on the EC's massive imports of soya bean and meal. Neither 
is it very helpful in the interests of trying to understand each 
others problems to present our measures as was done on !·1onday as 
representing a potential loss of 3 1/2 billion $ over 5 years on 
corn gluten feed and citrus pellets alone, since - I repeat - our 
aim is to stabilise not cut these imports. 
In concluding, Mr. Chairman, I submit that this major 
package has not been designed to shift the burden of adjusting 
the CAP away from the shoulders of our mvn farmers onto those of 
American farmers and exporters. If you are in any doubt, I suggest 
you ask any member of the European farmers delegation now in 
Washington for meetings with the Chamber of Commerce who they think 
is being asked to bear the burden. 
First, soyabean and soya bean meal exports would not 
be affected by the proposed tax on oils and fats. 
Second, stabilisation of corn gluten feed and citrus 
pellet imports will be carried out in strict conformity with 
GATT rules and in full consultation with the United States. 
Third, by far the most substantial and toughest part of 
this package is that which affects our own farmers and which 
calls for major sacrifices on their part. 
- 12 -
These measures which represent a major shift in the 
direction urged for years by United States critics of the 
Common Agricultural Policy should be welcome news for US 
farmers and exporters who have long complained about the 
European Communities extravagant spending on agriculture. They 
should not reduce current levels of US exports to the Commun~ty. 
On the contrary, the US farmer should stand to benefit from the 
cutbacks envisaged in European farm production which competes 
with US products on world markets. This always assumes, of 
course, that world import demand picks up again and is main-
tained, that some way out of the debt problems of developing 
countries can be found because this is where the potential lies 
and that the US is able to deal with the factor that bears the 
most significant responsibility for the fall in its exports -
the strength of the dollar. 


The effects of changes in the CAP on US agricultural trade. Speech by Derwent Renshaw, Delegation of the Commission of European Communities, at the 1984 Agricultural Outlook Conference. Washington DC, 31 October-3 November 1984

Abstract

Similar works

Full text

Available Versions

Archive of European Integration

Archive of European Integration